DANGER! - Unexploded Rent Review!

In the recent decision of Bello v. Idealview Ltd. the High Court ruled that a thirteen year delay did not, of itself, prevent a landlord from activating a rent review.

In 1969, the original landlord granted the original tenant a lease for 50 years from 25th March 1969. The initial rent was £60 per year with a rent review to a market rent after twenty five years. The review date was 25th March 1994 but no review took place. In 2005, B acquired the lease. In 2006, Idealview acquired the landlord’s interest. It then raised the issue of the rent review with B and, getting no constructive response, referred the matter to arbitration in accordance with the lease. B declined to take part in the arbitration. The arbitrator fixed a revised rent of £1,700 per year. Idealview then obtained a possession order in the county court on the basis of the unpaid rent.

B’s appeal to the High Court failed. One of his defences was based on the Limitation Act 1980, which provides that a landlord may not sue for rent more than six years after the date when the rent falls due. However, as is usual in rent review clauses, the lease provided that any additional rent payable following a review was only due once it had been fixed.

On the face of it, this case provides considerable comfort to landlords. However, it is important to bear in mind that this was a case of simple delay. The decision may well have different had the landlord actively encouraged the tenant’s belief that it would not activate the rent review. At the same time, B almost certainly could have played his hand more cleverly. It was probably a mistake not to take part in the arbitration. As it was, in the High Court the Judge’s role was limited to considering whether the arbitrator had got the law right. Also, alarm bells should have started ringing at the time B purchased the lease as the seller was only prepared to warrant that that the original rent had been paid. Where a lease is being sold and a rent review remains unactivated, the sale contract should always include an indemnity in favour of the buyer allowing him to claim reimbursement of any additional rent that might subsequently become payable in respect of the period before completion from the seller. More generally, although modern rent review clauses are invariably drafted so that time is not of the essence, tenants should remember that they have the option of bringing matters to a head by serving notice specifically requiring the landlord to activate the rent review within a reasonable time.

If you would like to know more about the implications of this case, please contact Caroline Wilton or Martin Banham-Hall.

Filed: 28/06/2010 12:07:07